Wheat sluggish during short week

Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach him at 800-450-1404.

Wheat: searching for news

The wheat markets traded with losses for most of the short trading week. Early selling was tied to continued selling pressure from poor export demand. Additional selling was tied to moisture events in the Southern Plains and Delta. For the short week ending Dec. 27, March Minneapolis dropped 16.75 cents, March Kansas City slipped 18.75 cents, and March Chicago dropped 19.75 cents.

Wheat started the week off playing a follower to corn and soybeans. Trading volume was thin as many traders were absent from the market because of the short session (the market closed at noon during the Christmas holiday). The lack of export demand continued to pressure wheat while the market is supported by spillover support from the other grains. This tug of war type trading will continue until winter wheat starts to emerge out of dormancy.

The Dec. 26 session started with wheat on the defense with early selling spilling over from a sloppy trading session in the other grains. The lack of news and continued poor demand for wheat added to the selling pressure. Light selling was tied to recent weather events that have brought good moisture (rain and snow) to much of the Southern Plains and Delta regions of the U.S. The selling was more tied to technical pressure than anything as traders continued to position themselves ahead of the end of month and end of year. Trading was thin as many traders cleaned up positions at the end of last week.

Wheat traded lower in all three exchanges Dec. 27. Selling was tied to the lack of news and continued technical selling. Light selling was also tied to fund long liquidation as many traders evened up positions ahead of end of month and end of year.

Traders are reluctant to hold positions as many are afraid of the economy going over the fiscal cliff. Demand remains poor as export sales seem to be still going to the Black Sea region (even though U.S. wheat is cheaper) and much-needed moisture has fallen in much of the major winter wheat region of the U.S.

The U.S. Department of Agriculture reported the wheat export inspections pace for the week ending Dec. 21 at 15.1 million bushels. This brings the year-to-date export inspections pace to 507.9 million bushels, compared with 582.98 million bushels at this time last year. Wheat export sales pace for the week ending Dec. 21 was estimated at 37.1 million bushels. This brings the year-to-date export sales pace to 686.2 million bushels, compared with 714.7 million bushels at this time last year. With 23 weeks left in wheat’s marketing year, shipments need to average 23.6 million bushels and sales need to average 15.8 million bushels to make USDA’s projection of 1.05 billion bushels.

Corn: year-end liquidation

Corn traded under pressure last week, losing 10 cents in the March contract. The absence of demand and nonthreatening weather in South America continues to pressure the futures. Ethanol production is also down 13 percent for the year on poor margins. Open interest in the grain commodities has been dropping as traders convert positions to cash prior to year-end.

The corn market remained above the $7 level on Dec. 24 on a quiet and thinly traded market. Corn traded to six-month lows on Dec. 20 which created some buying interest on Dec. 21, which carried over to Dec. 24. Additional support came from the talk of tight stocks and hope for an increase in export demand next year.

Corn continued to trade under pressure Dec. 26, closing near session lows. The lack of fresh news going into year-end is adding weakness to the trade, while export business remains stagnant and ethanol margins are in the red. Export inspections were within private estimates, but below the amount needed to meet USDA estimates. Also, U.S. corn is still higher priced compared with foreign competition. The losses from Dec. 26 carried over to add selling pressure Dec. 27. The outside markets had a negative tone and corn lacked any buying interest. News that Taiwan canceled a tender to buy U.S. corn because of high prices did not help and reports that the Ukraine has shipped its first cargos of corn to China added pressure.

Ethanol production for the week ending Dec. 21 averaged 834,000 barrels per day and up 1.5 percent versus the previous week but down 13.3 percent versus last year. Total ethanol production for the week ending Dec. 21 was 5.8 million barrels. Corn used in production was estimated at 87.6 million bushels. Corn needs to average 86.6 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion bushels. This crop year’s cumulative corn used for ethanol production is 1.4 billion bushels. Ethanol stocks as of Dec. 21 were 20.3 million barrels, which is down 2.5 percent versus the previous week, but up 14.9 percent versus last year. Imports increased to 2.6 million barrels and up 1.8 million for the week.

USDA’s export inspections report was bearish for corn. There were 13.5 million bushels of corn reported shipped, well below the 24.8 million bushels needed to meet USDA’s projection of 1.15 billion bushels. The export sales report for corn was at 4.1 million bushels, below the 17.7 million bushels needed to meet USDA’s projection of 1.15 billion bushels.

Soybeans: quiet week

The soybean complex traded mixed during the short trading week. The old-crop contracts remained under pressure from improving weather conditions in South America while the new-crop contracts traded higher on strong demand. For the week ending Dec. 27, March soybeans were down 11 cents while November 2013 soybeans were 2.75 cents higher.

The soybean market traded with strength throughout the session Dec. 24 as traders start to reposition themselves back into the market after the previous week’s significant decline. The soybean complex traded down to major support levels the previous week and last week traders were starting to return to the market as buyers because many think that there is not much downside potential.

Soybeans were higher at the open Dec. 26, but quickly moved lower, closing near the lows of the day. The losses came despite positive demand data (bullish export inspections and a new export sale). However, buying interest was lacking as commercial traders remain on the sidelines watching South American weather, which remains favorable for growing conditions. USDA announced sales of 115,000 metric tons of soybeans to China and 108,000 metric tons of soybeans to undisclosed destinations. Export inspections were delayed to Dec. 26 because of the holiday and came in well above the amount needed to keep pace with the USDA’s projection.

The Dec. 27 session had soybeans closing near the day’s lows on noncommercial selling tied to uncertainty with the impending fiscal cliff. The outside markets were weak as the U.S. dollar was higher, pressuring the market. Demand for U.S. soybeans is still strong, but could slow down as the Brazil harvest begins. Weather in South America remains mostly favorable, with some dryness in northeast Brazil being the biggest concern.

USDA reported soybean export inspections pace for the week ending Dec. 21 at 44.5 million bushels. This brings the year-to-date export shipments pace for soybeans to 737.4 million bushels compared with 532 million bushels for last year at this time. Soybean export sales pace for the week ending Dec. 21 was estimated at 3.2 million bushels, bringing this year’s total to 1.12 billion bushels, compared with 875.9 million bushels last year at this time. USDA’s export projection for the year is 1.345 billion bushels.

Barley

USDA reported barley’s export inspections for the week ending Dec. 21 at 8,000 bushels. This brings year-to-date export shipments to 5.58 million bushels compared with 5.61 million bushels for last year at this time. Barley export sales pace was estimated at zero bushels. This brings the year-to-date barley export sales pace to 5.6 million bushels compared with 3.8 million bushels for last year at this time. Dec. 27 cash barley bids in Minneapolis had feed barley at $5.05 per bushels with malting barley bids at $7.20.

Durum

USDA reported durum’s export inspections for the week ending Dec. 21 at 832,000 bushels with 717,000 bushels going to Turkey. Durum’s export sales pace was estimated at 1.6 million bushels. This brings the year-to-date durum export sales pace to 15.6 million bushels compared with 14.8 million bushels for last year at this time. Dec. 27 cash bids for milling quality durum were at $8 per bushels in Berthold, N.D., while Dickinson, N.D., bids were at $7.90.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed $7 (Canadian) higher for the short holiday week (canola did not trade Dec. 25 or 26) ending Dec. 27. The Dec. 24 session traded with gains with much of the buying spilling over from a stronger U.S. soybean complex. Additional support was tied to buying from traders who are returning to the market after the previous week’s sell off. The Dec. 27 session opened and traded with losses to start as traders try to get canola futures more in line with world vegetable oil products. Late session strength was a result of spill over buying from a rallying U.S. soybean complex as well as from improving demand outlook. Dec. 27 cash canola bids in Velva, N.D., were at $27.24 per hundredweight.

Sunflowers

Last week’s soybean oil export sales pace was estimated at 17.2 trillion metric tons. This brings the year-to-date export sales pace for soybean oil to 631.8 trillion metric tons compared with 163 trillion metric tons for last year at this time. Dec. 27 cash sunflower bids in Fargo, N.D., were at $21.10 per hundredweight.